Dear Money

by Martha McPhee

  Perfectionism, I came to understand, is a good thing in preparation, but a bad thing once a trade is being executed. You have to be able to let go. In rehearsing for a concert, a musician practices over and over to get it right. But on the night of the performance she has to let all of that work vanish, allow the feeling to take over, for spontaneity to carry her to the far reaches of her talent.

  I stood up to follow the salesperson, turned to Gus and said, "Whatever you do, don't buy another mortgage." I knew what was coming. Gut feel. The split decision that you can't be taught. It starts to seep into you, along with the squirt of adrenaline. Suddenly everything's switched on high alert. I knew Cerbeus was thinking of lightening up its mortgage holdings, so much so that the salesperson's tête-à-tête at the end of the row to warn me was completely unnecessary. I was barely listening to her, nodding in agreement, but all I could think about was how to reduce my risk. I had to, in order to take on a lot of Cerbeus's risk, which was what I was driven to do, of course. It is what all traders are driven to do, because in the end, the glory goes to the biggest stars.

  The guy's name was Chuck. He was on the direct, waiting for me to pick up, to price his trade. Chuck's thick Texas drawl cut across the line, skipping all of our usual pleasantries. Indeed, he wanted to sell me mortgages, FN 5.5s with a notional value of $5 billion. I'd played golf with Chuck, a slender, dapper man who wrote poetry in his spare time (fancied himself a Wallace Stevens) and loved that I'd been a novelist. Of all my clients, he was the one who asked me most about that career, had read Generation of Fire. He had put money in a pool with some of his colleagues, betting that within five years—start to finish—I'd be writing books again. I didn't hear this from him. He was an honest guy. No insider deals. But I did let him know I knew, told him he was dead wrong. "This is too exhilarating," I said. "Been there, done that." He gave me a big warm flirtatious smile that seemed to indicate he knew more about me than I did about myself. We were in the dry heat of a Scottsdale golf course on business, gigantic saguaros rising with all their limbs from the dirt, and the green grass as startling in this climate as a field of emeralds. A lot of Wall Street guys had that tic, thought they knew you better than you knew yourself. I shot him the same smile back. It became our own little game of truth, a way to connect.

  Now on the phone: he knew where 5.5s were trading; he had been watching the market, waiting for this last little rally before making the call. It was the start of a new quarter, and he needed to unload them and was willing to sell them at a small discount if I'd take the risk of the full size, all in one clip. Five billion dollars in one trade. It was five times the amount of FN 5.5s I'd seen traded all week. In one trade. I priced the risk 6 ticks below the bid side, 98–24 bid. "I need 98–26," he said, his tone devoid of the banter that typically accompanies price negotiations. He meant business. This was the turning point, my turning point.

  "Done," I said, dropping the line to return to my desk to focus on the risk—my risk now—and leaving the salesperson to confirm the trade. "Well," I said to Gus, "today just got a little more interesting."

  I didn't know it, but we were just getting started. The deal took three days. On the second day Chuck offered me another bundle, as big as his offer the day before, again worth $5 billion. Later that day he offered a third bundle—$6 billion in notional value. I bought all three lots.

  I didn't really have a choice. With all three lots I'd have more control of pricing, no competition with other dealers for positions. The more you control the information flow, the more you know, as with stud poker: if you have three kings, and an opponent is betting as if he has two kings, you know he's bluffing. But having all three lots, I also assumed tremendous risk. Sixteen billion dollars' worth of bonds, all in one coupon. This was easily ten times as many mortgages as I'd ever had, as Snake had ever had, in risk. What if I couldn't unload them? In fact, this was the biggest single trade our desk had ever done, putting the whole Securitized Products department well over its risk limit. (The approval for me to go over the risk limit came, of course, from above, with, oddly to me at the time, Win dissenting. He was uneasy about the leverage, thought I'd succeed but didn't like the precedent for B&B, thought it invited a strategy that could prove dangerous if allowed to grow. But these were heady times.)

  So what was on the line that required approval from the lofty white chamber above? If we go back to cars, you could say that I had, in effect, just bought all the new Toyotas in North America. They all belonged to me, in my chocolate skirt. It wouldn't be enough for me to say I had all the Priuses or all the Corollas. Rather, I had all of Toyota's cars. The job of selling them and making a profit was now entirely mine. The risk, of course, was that the market could decide it didn't want Toyotas anymore, not for a price that would make sense to me, that would allow for recouping what I'd laid out and, more important, what I'd borrowed. B&B didn't have all the capital that such a trade required. Actually, no bank could have had that kind of capital on hand. So here I'd have all these Toyotas that I hadn't paid for, but that I was responsible for, and that I would have to pay for if their value was adjusted down. The market could change its mind; it could decide it wanted GM's cars (with its Humvees and SUVs), could pass on my Toyotas. Of course the market didn't know I had all those Toyotas, giving me the advantage, and that's why Chuck didn't sell them around. Having all of them gave me the ability to manipulate and maneuver, to play to see what the market would bear. Now that I had priced the trade, I had to move the risk.

  At the end of the second day, I set out my strategy at an after-hours risk meeting in the conference room. The head of Rates, the head of Fixed Income, Win, Snake (on a conference call from India) and Gus were there, among others. I was the only woman. I noted this fact as I always did, but had grown accustomed to the arrangement. (Honestly, the thought of my gender would be fleeting at best; with this kind of risk almost everything else seemed irrelevant. In a way, even when you are in there explaining your strategy, all you want to do is go out on the desk and trade. For me, risk like that is the only time I want to be at work. You wake up early, you get in early, you are dying to start trading again.)

  Martin, the head of Rates, did most of the questioning. Win took a back seat, watching me navigate the waters, for this was the biggest test of all. But we were beyond the old bet. I was fully formed now, had the eyes, the hands, the legs, the heart of the trader. Win kept his dissent to himself. He wanted me to shine. Martin, in his thirties, a dad of three, who had a penchant for colorful suspenders, questioned pricing strategies. I had one, and I explained.

  I was going to see what the market would bear. I was going to take the price low, push the 5.5s against myself, widen them out by a half a point if I had to. The key, I believed, was to generate interest, generate trading volume. If I waited for normal market flows to take me out, I would die a slow, painful death as rumors compounded a slow and steady underperformance. But if I found buyers 10, 12 ticks wider, and used that to push them tighter, I had a shot at clearing the whole trade in the money—and in just a few days. Sixteen billion in bonds in three days, a multiple of our weekly average.

  There wasn't much chatter in the room, just quiet contemplation and the ubiquitous hum of electricity, the overbearing lights. I could see doubt in Martin's boisterous eyes, and not a little fear. His teeth were bright, whitened. But I had shown the boys that I could make money, had proved to them that I was scrappy and game. And here I'd wagered everything. I was allowed to use my strategy—one I chose because I believed buyers would come out of the woodwork. But if they didn't, if I'd been wrong about that baseline assumption and ended up having to sell as much as 16 ticks wider than where I had bought, I stood to lose $80 billion. In short, I'd be toast. But they knew they had to let me have this one, and they also knew that my fate depended on my ability to get it right. And they knew too, of course, that they'd be able to pick up the pieces—or most of them—if I went down. It was late September 2006. Times were good. T
here was plenty of money to be made. I wasn't going down, and I knew that, and somehow they knew that, because at the end of the day I was Win's, and he never failed.

  Later, Martin would tell me that he had believed my strategy was either the stupidest or the ballsiest thing he'd ever known. He would tell me that he discussed it with his driver while riding home to Tenafly, to his ten-thousand-square-foot home perched on half an acre, with lights all over the place, climbing up the trees and fireplaces in every bedroom, gas lit and glowing for effect. Leaning forward, he asked the driver, "If you had twenty thousand shirts worth fifty dollars each, would you offer them for less, for forty dollars, just so you could get people to chase them as you pushed them up to fifty-five?"

  "It all depends," the driver answered.

  The next day, I did just that. I started offering the 5.5s wider, 2 ticks, 4 ticks, a quarter point. All of a sudden, the lights started blinking as customers called in, asking for offers. People started wanting them. It reminded me of the time I went fishing with my brother in Scotland. He found a bend in a stream where you could drop your hook and pluck out fish after fish in seconds. We were pulling them out of the water. The littlest kids, even the two-year-old, were pulling fish out.

  This whole period in the financial world seemed like that; drop the hook in and pull out money. I, a former novelist, no business school experience, could drop the hook in just as easily, just like everyone else, better perhaps. Then I started moving the price back up, pushing mortgages tighter, creating my own reversal.

  I took my style from Snake's playbook. I was calm. I took off my shoes. Only those closest to me and those who needed to know, because of how my trade may have affected their own positions, were aware of the ongoing deal. The guys from the risk meeting were standing behind me. At 10:45, Win whispered, like a father, "Atta girl." And no one breathed, because they were all thinking the same thing, without a trace of condescension, because they were watching me, at my little desk, slowly move an entire market. They were, as they say, very deep into this play. Atta girl.

  At one point Radalpieno descended to the pit and quietly stood behind me with the rest of them, like spectators in an operating theater. When he came down, others on the floor began to sense that something very big was up and that I was at the center of it, like Jack LaLanne swimming up the Hudson, pulling a barge with his teeth. Radalpieno did not stay long; there wasn't much he could do. There wasn't much any of those guys could do. They didn't know the clients, the flows, the routes to unload, the way I did.

  I remained quiet. I was in midperformance now. I was feeling the fear, and it was mixing beautifully with the moment, keeping my senses alert and alive. Everyone was still buying—remember, I had $16 billion to unload. The whole market was moving. You could see it happening on the screens. I recalled the day in Radalpieno's office when Snake had made the screens move, and I confess that I swelled—in a controlled way, but I swelled all the same—from all that I knew and from all that I had learned. I was proud of the results and surprised at the same time. I was good. I could feel it. I recalled Miss Fine reading my essay on my bedroom to the class, all the students attentive, listening to my words being read in Miss Fine's dulcet tones. They were rapt; they were mine. Now I remained calm. Chuck, at Cerbeus, had loved that I'd been a novelist. Having been a novelist had given me the advantage here. Having been a novelist had finally paid off.

  But I didn't have much time to think. I was in high demand from salespeople and from customers who wanted to know my "thoughts" on the market. The rumors had started. The market knew that something had happened, something big, but more than that, they knew I was at the center of it. Me. Someone who, just a year earlier, wasn't even on the radar screen. Now, if you owned a mortgage, I probably knew more than you did about your risk. Knowledge was power, and my knowledge of who had kings (to return to our poker analogy), and who didn't, made my views critical to anyone trading the market.

  We were almost out of the risk—within striking distance of just a few billion left, an amount that even I could sleep through the night with. Win and Martin were beginning to relax behind me. Gus and I tolerated the small jokes that replaced their tense silences, though in reality we stayed focused on the risk, communicating with hand signals and in our own shorthand as we managed the book.

  "Pick up Mitchell," said our head of Pass-Through Sales. Mitchell was an important client, with Samson. He had a sense of what I had, and he wanted to buy. I picked up.

  "Indy, Indy, Indy," he said, his voice lightly cajoling. "You have been a busy girl this week, haven't you?"

  "I do what I can," I responded sweetly. "That is, after all, why I'm here—to trade. How can I help you?"

  "Listen," he continued, our small talk already over. "I know you need to sell these pigs, and I can see why—they're clearly not the cheapest things out there. But I have a little cash I can put to work. I thought I could help you out. Why don't you sell me one billion Fannie 5.5s. I can sell you ten-year notes on the other side. Say, 99–26, I'll buy the mortgages, versus 101–04 on tens. I'm just calling you, trying to do you a favor here."

  This was it, the last billion, to take me back under my risk limit. If I printed this trade, we were home free. But the price—I knew his bid was too low. FN 5.5s were 99-27+ bid. No one else would sell a billion within a tick of that. I knew he expected his persuasive banter to weaken me, but I wasn't the same person I had been the first time I walked into this building nearly three years ago. "99–276 offer versus that strike," I said.

  "India!" He tried to sound shocked. "I'm trying to help you out here." Then, with a sigh, as if he couldn't believe what a bad decision he was making, "How about 99–26+?"

  "Mitchell," I responded firmly, feeling Win's doubt and Martin's skepticism, "276. You know you're not going to get them there from anyone else. It's my best level, and my final offer. Take it or leave it." That 276 was a three-quarters increase, an odd figure, but I could get Mitchell there. I could hear management behind me—Win and the others—suck in a collective breath, tense as I was, as I fought for an extra $390,000, when just two days before this risk could have cost millions.

  "Why the three-quarters?" Martin whispered.

  I didn't bother turning to face him. I remained focused, as if I were in a yoga balancing pose, tree pose, half moon, keeping my third eye trained. A beat passed.

  "Done," Mitchell said, and the group exhaled.

  Martin slapped me on the back. "Bingo!" he shouted. The deal was executed, and with my three-quarters I sailed to the finish line, selling all the 5.5s, moving risk for an important customer and earning more than $14 million for the company. Not bad, when I could have lost $80 million. Not bad at all.

  "Three-quarters, that was great. Just dynamite," Martin would say for days.

  "Three-quarters," Win would say, catching me at the elevator, a twinkle in those beautiful brown eyes. I could think of many things, among them that this would be my year, that this year I'd get a bonus that could accommodate not one house, but a few. I'd rolled the dice and done more, it seemed, than merely win. It was not a giddy feeling. It was the sensation of invincibility.

  "Are you happy?" Theodor asked soon after, as we walked the streets of Chelsea on a Saturday without kids. He held my hand in his. Was I happy? He never asked me questions like that. Too direct and simple for him. The fact that he really had no idea what I did all day, I supposed, had reduced the caliber of his questions to the most elementary level. Are you happy?

  "Yes." In a word. Yes. Yes, I was happy. I was exhilarated. I was cool. I was smart. I was savvy. I had brains, fast brains. It's a lie that money is more interesting for those who don't have it than for those who do. It's too fun to spend. Radalpieno secured and tripled my bonus. Tuition was no longer a struggle. We could keep the out-of-network allergist my older daughter loved. I did not fret about a parking ticket, the groceries, how we'd pay April each week. We asked Janine, the cleaning woman, to come four times a week.
We started looking at townhouses. Having lived the other life, I knew the difference, knew that I now preferred to worry about my trades, other people's money rather than my own, rather than all I had struggled to afford. And spend? I booked a Christmas ski vacation in Telluride for the family: our own house, chef, valet, skis brought to the door, ski on ski off, sitter for the girls, private instruction, chauffeur—just to see, in part, how it felt. It felt as if I were getting away with something, enjoying a pleasure that wasn't quite mine. But it was! I donated to the girls' school, to museums, literacy programs, the public library, to all the prizes I'd won and been nominated for. I sent April home to her island, brought her family here. I loved being generous. I remembered that long-ago day, publication day of the last novel, remembered hoping that it would do well so that I could be generous. I could be so now.

  In a store window in Chelsea I spotted a lovely dark blue wool dress, fitted, falling to just above the knee, three-quarter-inch sleeves, mother-of-pearl buttons running down the back—Cuban-born designer. Theodor asked me to try it on for him. I did, spinning before him as he stood, hand resting on chin, appraising me. He liked me in the dress, wanted to unfasten the buttons one by one. I bought it. I did not look at the price tag. I did not feel the guilt, the concern over how I'd scramble to pay for it. We ate a long lunch with wine on a rooftop terrace where people also splashed in a heated pool, and the Hudson River lay before us with all its happy sailors and in the distance the Statue of Liberty with her torch and her song of freedom.

  We walked along the river to Tribeca, dropped in on the Chapmans, surprising them—Will at his desk, Emma straightening up. They were tanned and relaxed; the summer in Maine still glowed on their skin. The girls had an art project spread out, some papier-mache concoction, and they were up to their elbows in flour and goo, working assiduously at the long kitchen table. They didn't bother to look up and greet us until chided by Emma. What a good mother she was, I noted, with this project, clearly of her design. I admired her, her organic effort. With dishes in the sink and the place a little untidy, Will in bare feet and a T-shirt, I could see them as if suddenly new, different, no longer on the pedestal upon which I'd placed them. Rather, the Chapmans were just people. Nice, good, hard-working, loving people. They didn't know more than I. How had I ever thought that? Will offered us drinks and the four of us sat before the big windows of their living room as the sun went down into New Jersey and the planes lined up from the north to land at Newark.